Quantifying Periodical Payments by Reference to the Needs Principle: Surveying the Wood Not the Trees

Published: 28/03/2024 11:43

Tensions between competing propositions in financial remedy cases are not unusual. For example in Re P (Child: Financial Provision) [2003] 2 FLR 865 Thorpe LJ at [48] referred in the context of CA 1989 Schedule 1 to:

‘an inevitable tension between the two propositions, both correct in law, first that the applicant has no personal entitlement, secondly, that she is entitled to an allowance as the child’s primary carer.’

Is there also tension when determining the quantum of the applicant’s budget?

It is well-settled that the quantum of periodical payments is to be assessed by reference to the needs principle and not the sharing principle (Waggott v Waggott [2018] 2 FLR 406 per Moylan LJ at [121]–[128). But what does this mean in practice?

It has often been said that there is something of an ‘art’ in the preparation of a budget: in Re P (Child: Financial Provision) Thorpe LJ stated at [47]:

‘the judge is likely to be assailed by rival budgets that specialist family lawyers are adept at producing. Invariably the applicant’s budget hovers somewhere between the generous and the extravagant. Invariably the respondent’s budget expresses parsimony. These arts have been developed in Matrimonial Causes Act 1973 claims …’

The assessment of need is ‘elastic, fact-specific and highly discretionary’ (SS v NS (Spousal Maintenance [2015] 2 FLR 1124 per Mostyn J at [40]). There is ‘an almost unbounded discretion’ (FF v KF [2017] EWHC 1093 (Fam) per Mostyn J at [18]). However, the quantification cannot be looked at in isolation but requires a consideration of the other s 25 factors (ND v GD (Financial Remedies) [2022] 1 FLR 716 per Peel J at [49] and WC v HC (Financial Remedies Agreements) (Rev 1) [2022] 2 FLR 1110 per Peel J at [21]⁠(xii)).

The needs assessment must also be rooted in the consideration of the budget rather than being a figure ‘plucked out of the air’. In O’Dwyer v O’Dwyer [2019] 2 FLR 1020 Francis J stated at [36] that when considering the quantum of periodical payments by reference to the needs principle:

‘a judge is not entitled simply to take a round number without reference to any arithmetic, and in particular (a) the recipient’s needs; (b) the income that the recipient’s capital will generate and (c) whether or not the recipient’s capital should be amortised; and, if so (d) from what date the recipient’s capital should be amortised. Parties who conduct these cases up and down the land, often without the benefit of legal advice, need to know how judges alight upon a particular figure for periodical payments. Otherwise, discretion gives way to a risk of disorder or even chaos with people not knowing how or whether to settle.’

Further, at [43] Francis J stated that:

‘I am troubled by the absence of any proper analysis of the wife’s budget. It is clear to me that it is the judicial function to analyse the budgets put forward, albeit that a detailed analysis of every item is not required. A judge must always, of course, be alive to forensic manoeuvrings by experienced family lawyers.’

These latter comments echo those made in Re P (Child: Financial Provision) by Thorpe LJ and by the same judge in the earlier case of Purba v Purba [2000] 1 FLR 444 at p.449:

‘In this field of litigation budgets prepared by the parties often have a high degree of unreality – usually the applicant wife’s budget is much inflated … But the essential task of the judge is not to go through these budgets item by item but stand back and ask, what is the appropriate proportion of the husband’s available income that should go to the support of the wife?’

Moylan J (as he then was) made a similar observation in AR v AR (Treatment of Inherited Wealth) [2012] 2 FLR 1:

‘[71] … in my judgment the court’s task when addressing this factor is not to arrive at a mathematically exact calculation of what constitutes an applicant’s future income needs. It is to determine the notional annual income which, in the circumstances of the case, it would be fair for the wife to receive. Further, in a case such as the present, in my judgment the wife is entitled to have sufficient resources to enable her to spend money on additional, discretionary, items which will vary from year to year and which are not reflected in her annual budget.’

In his seminal summary of the ‘relevant principles in play on an application for spousal maintenance’ in SS v NS (Spousal Maintenance) Mostyn J stated at [46] that:

‘(vii) The essential task of the judge is not merely to examine the individual items in the claimant’s income budget but also to stand back and to look at the global total and to ask if it represents a fair proportion of the respondent’s available income that should go to the support of the claimant.’

This followed an earlier reference to the above citation from Purba v Purba at [36] after which Mostyn J stated that:

‘This decision should not be taken to mean that the individual items of a budget are irrelevant. Rather, it emphasises that in the exercise it is important that the court should clearly survey the wood as well as the trees.’

It is interesting to consider whether these references to the ‘appropriate proportion’ (per Thorpe LJ) and/or the ‘notional annual income which … it would be fair … to receive’ (per Moylan LJ) and/or a ‘fair proportion’ (per Mostyn J) introduces the concept of sharing (at least to some degree) into the quantification of periodical payments notwithstanding the clear judicial guidance cited above. Is there a tension here?

In any event it is clear that that the judicial steer is to avoid a line-by-line (cross) examination of the budget. Francis J made this clear when he stated in O’Dwyer v O’Dwyer at [43] that ‘a detailed analysis of every item is not required’. A similar point was made in Finch v Baker [2021] EWCA Civ 72 per Moylan LJ when he commented upon a trial judge’s ability to assess the needs of the parties:

‘[42] … A judge is well able to assess a party’s income needs without … them being subject to detailed cross-examination. The wife’s needs had clearly been put in issue by the husband (as referred to during the hearing before the Judge) and a judge is well-placed to assess what is achievable and what is fair without any such, frankly often banal, cross-examination.’

Practitioners and judges alike will empathise with Moylan LJ’s description of cross-examination on budgets as being ‘frankly often banal’. The questions as to what extent income needs ought to be analysed or assessed at all in cross-examination and how far back from the individual lines in the budget the court should stand remain open and interesting ones.

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